1. CONSUMER PROPOSAL PRESENTATION
September 25, 2017

2. DEFINITION (66.11)
A consumer proposal is:
A formal (legal) procedure filed by an insolvent debtor or a bankrupt which, if accepted by a majority of creditors, will settle all debts save those described in Section 178(1).

3. PARTICIPANTS Ø Insolvent (or bankrupt), individual (66.11).
DEBTOR:
Ø      Insolvent (or bankrupt), individual (66.11).
Ø      Having not more than $250,000 in debts excluding mortgages on principal residence (66.11) 
Ø      Joint filings between debtors are allowed as described in Superintendent directive.

4. EXCLUDES:
Ø      A debtor who has filed a Division I Proposal or a notice of intention until the trustee is discharged (66.12)
  Ø      A debtor whose consumer proposal has been annulled or deemed annulled unless Court orders otherwise or unless all debts included in 1st proposal have been completely paid. (Note: this does not apply to a debtor whose 1st proposal was rejected by creditors).
 TIME FRAME:
Ø Not greater than 5 years (66.12)

5. THE CONSUMER PROPOSAL PROCESS

6. Commencing the Proceedings
    
Ø Prepare proposal and related documents in prescribed forms, have signed and filed with the Official Receiver.
Ø Prepare Report of Administrator (See Standards of Professional Practice # 8).
   Ø Send creditors (within 10 days): the proposal, Statement of Affairs, Report of Administrator, proof of claim form, and Notice to Creditors (Form 49).

7. Creditor Acceptance or Request for Meeting of Creditors:
A.     Deemed Acceptance:
Ø      After 45 days – If no obligation has arisen to call a meeting of creditors, consumer proposal deemed accepted by creditors. (66.18)

8. B.     Request for Meeting:
Ø      Within 45 days following the filing of the consumer proposal, Official Receiver requests a meeting (66.15(1)); or
  Ø     At the expiration of 45 days following the filing of the consumer proposal, 25% or more proven claims requested a meeting be called (66.15(2)).

9. If Request for Meeting:
Ø      Meeting to be held within 21 days after being called.
Ø      Notice to the consumer debtor, every known creditor, and the official receiver of time and place of meeting at least 10 days prior (66.15(3)).

10. Meeting of Creditors: Ø Voting by Ordinary Resolution.
Ø      No quorum at meeting, consumer proposal deemed accepted (See Directive 22)
Ø   Voting by Ordinary Resolution.
Ø     Related creditors may vote against, but not for acceptance.
Ø      Administrator as creditor, may not vote.

11. If Consumer Proposal refused by creditors, refused by court, or withdrawn:
Ø      Inform all creditors, O.R. and Debtor within days of the:
i)     refusal of proposal by creditors
ii)    refusal of proposal by court iii)   withdrawal of proposal by debtor

12. Deemed Court Approval or Court Approval
Ø     If after 15 days subsequent to approval by creditors, no request exists for the Court to review the consumer proposal, it is deemed accepted.
Ø    Application to Court if requested by O.R. or interested party, within 15 days of creditor acceptance or deemed acceptance.

13. Procedure for Application to Court (66.23)
Ø      At least 15 days prior to hearing, notice to debtor, proven creditors and O.R.
Ø      Prepare Report of Administrator (Form 51) and file with Court at least 2 days before hearing – file same report with O.R. at least days prior to hearing.

14. Court May Approve or Refuse to Approve Proposal
  Ø   Court shall refuse to approve proposal that is not fair to debtor and the creditors or if it does not comply with the Act (66.24(2) and (3))
And
Ø      May refuse proposal when established:
(1) Debtor committed an offence, or (2) was not eligible to make a consumer proposal.

15. During Term of Proposal
  Ø     Monitor consumer proposal for compliance with terms and frequency of payments (deemed annulment or annulment may be required (66.3 and 66.31)).
Ø     If annulment (deemed or not), advise Official Receiver and creditors without delay.
Ø     If dividends are not payable at least once every months, inform the Official Receiver and all known creditors of any change that might jeopardize consumer proposal (after having consulted debtor).

16. Ø Receive in trust, payments from debtor and
Ø      Receive in trust, payments from debtor and distribute dividends according to terms of consumer proposal – See directive on Banking – Estate Funds
 Ø      Prepare any required notice of stay of proceeding.
 Ø      Conduct or arrange for Counselling as required by Superintendent’s directive. – Counselling is Mandatory (no Certificate of Full Performance if counselling is not competed)
 Ø      Deliver certificate of full performance and proceed with discharge.

17. GENERAL COMMENTS

18. CONSUMER PROPOSAL WRONGFULLY FILED
It is strictly forbidden to knowingly file a proposal if the debtor is not eligible or if you have any
reason to believe that there has been non- compliance with Section (66.13(3)).

19. You can still have proposals that should not have been filed but were
You can still have proposals that should not have been filed but were. This can happen when:
i)  an undeclared debt “shows up” and the $250,000 limit is surpassed.
ii)  the reason on which you based your decisions to file a joint proposal are false (e.g.. Absence of the responsibility of spouse for major debt.)
Should this occur:
Ø Inform the creditors and official receiver, but proposal not invalid for this reason only.

20. DUTIES OF THE ADMINISTRATOR
Ø    assessment of debtor
Ø    investigate property value and finances
Ø    obtain and verify where applicable
Ø    property tax assessment and/or comparable listings or sale documents
Ø    review mortgages
Ø    car registration and Black Book evaluation/appraisals
Ø    chattels or liens on car and balance due on secured claims

21. The creditors need to be informed on the realizable value of the assets and on contributions that would be required if the Debtor filed for bankruptcy (surplus income) because the alternative to the proposal (in case of refusal) generally is bankruptcy. In order to convince the creditors that they should accept a proposal is to show them that they risk to lose even more if the debtor is forced to file for bankruptcy. Standards of Professional Practice # 8 provides guidance.

22. The acceptance of a proposal could mean renunciation of sections 95 to 101 recourses, therefore, it is important that the administrator analyze any transaction that would give rise to potential realizations in a bankruptcy. Complete information must be given to the creditors in order to fulfill your duties and to preserve your credibility.

23. Ø      Prepare and file a report on
1i)        results of investigation i.e. estimated realization in case of bankruptcy
Ø    Reasonableness and fairness should be determined in a mathematical manner.
That is, the best alternative (between bankruptcy and the proposal) that will yield the best dividends for creditors with a minimum of risk.

24. ii) your opinion on reasonableness and fairness. of proposal i. e
ii)       your opinion on reasonableness and fairness of proposal i.e. vis-à-vis creditors
Ø     Fairness and reasonableness are from the creditors’ point of view and not the debtors’. It is presumed that the debtor is the author of his/her proposal and therefore is reasonable and fair to himself/herself.

25. iii) your opinion on ability of the debtor to fulfill
iii)       your opinion on ability of the debtor to fulfill the terms of the proposal
  Ø     The last point is the administrator’s opinion as to the ability of the debtor to fulfill the terms of the proposal. That is probably the most difficult point to evaluate because most often, the payments are spread over a two to five year term. Much can occur in that time frame.

26. DEEMED ANNULMENT OF CONSUMER PROPOSAL (66.31(1))
Unless the Court has previously ordered otherwise, or unless an amendment to the Consumer Proposal has previously been filed, proposal is deemed annulled on : 
Ø     Payments are made monthly, or more frequently, consumer debtor is in default for an amount equal to three payments; or 
Ø     Payments are made less frequently than monthly, when the consumer debtor is in default for more than 3 months on any payment.

27. EFFECT OF ANNULMENT
Ø      Stay of proceedings lifted and creditor rights revived.
Ø      No deemed bankruptcy for debtor, unless debtor was bankrupt when proposal commenced.

28. Duties of administrator in relation to deemed annulment – 66.31(3)
Without delay after a consumer proposal is deemed annulled, the administrator shall
file with the official receiver a report in the prescribed form in relation to the deemed annulment; and
send a notice to the creditors informing them of the deemed annulment.

29. REVIVAL OF CONSUMER PROPOSAL
Notice of possibility of consumer proposal being automatically revived – 66.31(6)
In the case of a deemed annulment of the consumer proposal made by a person other than a bankrupt, if the administrator considers it appropriate to do so in the circumstances, he or she may, with notice to the official receiver, send to the creditors – within 30 days, or any other number of days that is prescribed, after the day on which the consumer proposal was deemed to be annulled – a notice in the prescribed form informing them that the consumer proposal will be automatically revived 60 days, or any other number of days that is prescribed, after the day on which it was deemed to be annulled unless one of them files with the administrator, in the prescribed manner, a notice of objection to the revival.

30. Automatic revival – 66.31(7)
If the notice is sent by the administrator and no notice of objection is filed during the period referred to in subsection (6), the consumer proposal is automatically revived on the expiry of that period.

31. Notice if no automatic revival – 66.31(8)
If a notice of objection is filed during the period referred to in subsection (6), the administrator is to send, without delay, to the official receiver and to each creditor a notice in the prescribed form informing them that the consumer proposal is not going to be automatically revived on the expiry of that period.

32. Administrator may apply to court to revive consumer proposal – 66
The administrator may at any time apply to the court, with notice to the official receiver and the creditors, for an order reviving any consumer proposal of a consumer debtor who is not a bankrupt that was deemed to be annulled, and the court, if it considers it appropriate to do so in the circumstances, may make an order reviving the consumer proposal, on any terms that the court considers appropriate.

33. Duty of administrator if consumer proposal is revived – 66.31(10)
Without delay after a consumer proposal is revived, the administrator shall
file with the official receiver a report in the prescribed form in relation to the revival; and
(b) send notice to the creditors informing them of the revival.

34. CONSUMER PROPOSAL BY BANKRUPT (66.4(2))
When a consumer proposal is filed by a bankrupt
Ø   Must be approved by the inspectors.
  Ø   Time with respect to determining claims shall be the time at which consumer debtor became bankrupt.
Effect of Consumer Proposal by Bankrupt
Ø   Operates to annul bankruptcy and revest assets in debtor, unless otherwise stated in proposal.

35. Ø Stay of proceedings is lifted.
Effect of a Deemed Annulment or an Order Annulling the Consumer Proposal of a Bankrupt  
Ø      Stay of proceedings is lifted.
Ø      Debtor is deemed to have made and assignment on the date the proposal annulled or deemed annulled.
  Ø      Debtor not eligible to make another consumer proposal (unless court order obtained). 
Ø      Administrator shall, within 5 days of the annulment or deemed annulment, call a meeting a creditors

36. REMEDIES AVAILABLE TO ADMINISTRATOR TO ENSURE FULL PERFORMANCE OF PROPOSAL  
Ø      Assignment of wages (66.35(1))
Ø      Certificate registered on title (66.29(1) and (2))

37. MATTERS TO CONSIDER

38. Child/Spousal Support
Ø      Child support arrears and spousal support arrears are a preferred claim
Ø Given the large correlation between matrimonial problems and financial problems, the administrator needs information pertaining to support obligations.

39. Student Loans & CRA
Ø    Student Loans (less than 7 years after leaving school) are provable claims and are stayed by Section 69. A term will need to be added to the proposal stating that student loan is not discharged.
Ø     A consumer debtor with income tax debts:
CRA will vote against any proposal where tax filings are not up to date. They will require certain terms be included with regards to future tax filings and future taxes owing (See Standards of Professional Practice #11).

40. STAY OF PROCEEDINGS (S. 69.2)
Ø  Paragraph 1 and 4 is same as in bankruptcy i.e stay of proceedings for all unsecured creditors subject to s and stay of proceedings for secured creditors with court order and only under certain circumstances.
Ø Paragraph 2 specifies that there is no stay of proceedings if 2nd proposal is filed within months of the previous.
Ø  Paragraph 3 specifies that there is no stay if two amendments are filed within 6 months of each other.

41. COMMENTS RE. STAY OF PROCEEDINGS
 There is no general stay of proceedings for secured creditors. The only protection against secured creditors is s in which the protection is only valid if no other default than having filed a proposal has occurred prior to the filing of the proposal. This means for example, that if the mortgage payments are not up to date or if property taxes are in default, the secured creditor would be entitled to realize on his mortgage.

42. Section protection covers any type of contract including: mortgages, leases, chattel mortgage, conditional sale contracts, credit lines, loans, etc. Where a lease is concerned, the protection is enlarged to include cases where there are arrears in rent.

43. PUBLIC UTILITIES (66.34(3))
Generally, they are not allowed to discontinue service even if in arrears.
Practically, however, public utilities and lessor can require cash payments i.e. pre-payment for services rendered after filing of proposal. (66.34(3))
A service provider can ask the Court to be excluded from these provisions if it is likely to cause financial hardships. (It is not likely that utilities co. involving this section will suffer financial hardship)(s (6)).

44. PROTECTION FROM EMPLOYERS
The debtor is also protected against dismissal or other means of discipline by his employer on the sole ground that he has filed a consumer proposal (s )

45. ADMINISTRATORS RENUMERATION
Tariff: proposal filed on or after April 30th, 1998
$750 upon filing
$750 upon court approval
20% of all sums distributed to creditors payable upon said distribution.
Section 66.12(6) sets out the procedure relative to taxation and discharge (see also rules )

46. VARIOUS FEES Ø Counselling $85.00 each Ø Filing Fee $100.00
Same as bankruptcy:
Ø      Counselling $85.00 each
Ø      Filing Fee $100.00
Ø      Court Fee $50.00
Ø      HST/GST

47. Salyzyn & Associates Limited
Presented by
Brenda L. Wood
Salyzyn & Associates Limited